Avoiding interest rate issues – 5 steps you could be taking right now
Interest rates, those fluctuating little numbers that make some people rejoice and others cry. Many do not even properly understand interest rates, and this is a bit of a mistake. Yes most of us know that high interest rates are bad and low are good, but what about what a variable or floating interest rate?
If you’re not locked in on a fixed rate, using a floating or variable rate can cause your debt to balloon by as much as 4% per year (though it can also shrink it, depending on how it’s going). Variable rates simply mean that they fluctuate as the bank changes them, and are not locked in.
This article is going to overview five steps you can take to avoid dealing with the whole mess of interest rates, steps you can take today.
Budget, and stick to it
One of the best ways to avoid interest rates is to avoid debt, so budgeting is a huge key here. By managing your finances carefully and living within your means, you’ll be building savings instead of debt and avoiding all troubles with interest rates.
If you have a high interest debt, look at your options. It’s possible you could balance transfer and pay no interest while you pay off the debt, or that you could renegotiate your interest rate by consolidating your debt for faster repayment. The bottom line here is to try to minimize your debt levels themselves, so that it won’t matter to you whether interest rates are high or low.
Let’s take a minute now and talk about debt consolidation. Debt consolidating is a process whereby you unite all your debt into one large debt to a single institution, this often lowers minimum monthly payments and makes it possible to pay off faster. It’s also a lot easier to manage than having several different debts, each due on different days with differing amounts.
Ditch credit card options
Credit cards are a huge source of debt. Even for the most strong willed individual, it can be a struggle not to pay out money that you just don’t have. One thing you can do to avoid interest rates is to avoid credit cards all together, particularly when the interest rates for such borrowing are high.
Lock in to an interest rate
Where possible, you can always look for a fixed rate instead of a variable/floating rate for loans. This ensures that no matter what happens to the interest rates, your loan payments will not fluctuate. This removes the worry of interest rate fluctuation all together, though there is still interest to be paid.